Snow Sports Leader Goes for Beachhead
Ski and snowboard maker K2 Inc. is heading for the beach.
Beginning next month, shorts, shirts and caps emblazoned with the K2 logo will begin appearing in Southland surf shops as the company takes a risk almost as big as some of the extreme sports athletes it outfits.
The Los Angeles sports-equipment maker is using last year’s acquisition of Katin USA in Costa Mesa as a springboard into the $1.7-billion surf-wear industry.
Its new K2 Surf apparel line comes on the heels of a marketing campaign that captivated the surf crowd by offering $50,000 to the surfer who rides the biggest wave this winter. The winner will be announced next week.
With the Big Wave Challenge trumpeting its new apparel line, the company now will be going head-to-head with larger, better-known names like Quiksilver, Billabong and Gotcha.
Costa Mesa-based Quiksilver already is girding for a fight over the hallowed waters of surfing, where big-name companies like Guess Inc. and Nike Inc. have flopped. And surfers themselves are wary of outsiders, which may make it difficult for K2 to win their hearts and minds--and their pocketbooks.
But K2 has shown an uncanny ability to venture successfully into new territories, largely by hiring executives, buying companies and signing athletes who are known and respected.
A good contest also helps, and the Big Wave Challenge has created some serious swells in Southern California’s surf scene.
For starters, it had the unintended effect of upstaging the annual Eddie Aikau competition at Waimea Bay in Hawaii, tweaking the nose of industry leader Quiksilver, which sponsors that event. And last month, K2 signed Quiksilver rider Tim Curran, the No. 1 surfer on the American tour, to a three-year, six-figure endorsement deal.
Those developments aren’t sitting well with the Big Daddy of the surf industry.
“I think they’ll look silly trying to get into this business,” said Quiksilver co-founder and chairman Bob McKnight. “It would be like if we went out to do ski-wear. Our market is very suspicious of stuff that is contrived, that comes on too strong and is not part of the history and culture of the sport.”
But Katin, which has made board shorts since 1958, is a known entity to surfers. It is on that goodwill and the Katin name that K2 is trading on for a successful launch, and the early results have been encouraging.
“We’ve been a Katin dealer for years, so it was just second nature for us to add K2,” said Paul Nielsen, owner of the Waveline Surf Shop in Ventura, who placed an initial order for $2,000 worth of clothing. “The similarity with Katin was real strong, which makes it really easy for me to sell.”
The 20-piece line, put together by Katin designer Rich Lohr, is tiny by industry standards. Typically, the bigger brands have more than 150 different types of garments and accessories in a seasonal line.
K2 plans to sell its clothes only to surf shops, avoiding department and mainstream apparel stores such as Robinsons-May and Miller’s Outpost.
“If we do $1 million in sales this year, that will be a great thing,” Katin President Bill Sharp said. Over the next five years, K2 expects sales from surf apparel to grow into a $25-million-a-year business.
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K2, named after its founding Kirschner brothers, made its name in skis in the 1970s. In the late 1980s, it became the first ski outfit to make the jump successfully into snowboarding, a sport whose participants think of skiers as wimps.
In 1995, it introduced a step-in binding system that is now sweeping the industry. Today, K2 has the second-largest share of the snowboard market, trailing only industry pioneer Burton Snowboards of Vermont.
Based on that success, K2 has put its name on everything from bicycles to in-line skates to snowshoes, developing ground-breaking technology with each new product introduction. The company also makes Stearns life jackets, Shakespeare fishing tackle, Dana Design backpacks and a host of other recreational products.
“Our goal is to be the leader in technology and innovation and be No. 1 or No. 2 in any market we enter,” said Bonnie Crail, a surf industry veteran who heads K2’s Z Sports division.
That goal has given it a reputation for technical prowess in the sports world.
When the Dutch speedskating team began to pull away from competitors with a new clapskate, the German team came to K2 and asked for help. With a new K2 clapskate, the German women’s team won six medals--including a sweep of the 3,000-meter event--at the recently concluded Winter Olympics. In all, athletes using K2 skis and skates won 17 medals at the Nagano Games.
But such innovation can be a two-edged sword.
In 1994, the company rolled out a new in-line skate with a softer, more comfortable boot. It was a big hit with consumers, and competitors quickly moved to keep up. But a severe glut of the old hard-boot models ensued, and manufacturers such as industry leader RollerBlades began deeply discounting. Those rock-bottom prices are luring buyers away from the newer skates.
“That is one of the problems of being the innovator in the sports-equipment industry,” said analyst Shawn Milne of Hambrecht & Quist brokerage in San Francisco. “There’s always the me-too product right behind you.”
Largely because of flattened in-line skate prices, K2 expects profits through the first half of this year to be below year-earlier levels, which has kept its stock in the low $20s since late January. It closed Wednesday at $21.38, down 31 cents, in New York Stock Exchange trading.
Milne sees K2’s earnings rising about 10% this year, to about $24 million, but that would still be below the record $25.2 million earned in 1996.
Surf apparel is the first of three new product lines that K2 will introduce this year:
* In May, Carlsbad skateboard maker Planet Earth, which K2 acquired last October, will roll out a new line of shoes called Adio. They were designed by company founder Chris Miller, the No. 2 skateboarder in the world in the late 1980s and early ‘90s. Priced to sell at $70 to $85, Adio will be aimed at the high end of the market. K2 has no plans to put its name on any of Planet Earth’s products, Crail said.
* This fall, K2 will unveil a new line of BMX-style bicycles aimed at 8- to 20-year-olds to round out its line of full-suspension mountain bikes. The company expects BMX sales to rise to $25 million annually within three years, said John Rangel, the company’s chief financial officer.
K2, meantime, will boost its research and development spending by about 15% this year, to nearly $14 million, as it continues to look for the next high-tech gizmo to keep it a market leader.
“When you’re dealing with enthusiasts,” Rangel said, “you’ve got to the deliver cutting-edge products.”
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K2 Inc. at a Glance
Headquarters: Los Angeles
President/CEO: Richard M. Rodstein
Status: Public
Exchange: NYSE
Business: Designs, manufactures and markets sporting goods and recreational and industrial products
Products: In-line skates, skis, snowboards, mountain bikes, surf apparel, skateboards, backpacking equipment, fishing tackle, life jackets, outdoor clothing, marine electronics and equipment
Brand names: K2, Olin, Madshus, K2 Exotech, K2 Endotech, Shakespeare, Stearns, Dana Designs, Katin, K2 Surf, Planet Earth, Rhythm, Thermo-Ply, Simplex Products, ProFlex/Girvin and Hilton Active Apparel
Sales (in millions)
1993 $431.6
1997 $646.9
Net income (in millions)
1993 $11.1
1997 $21.9
Source: Bloomberg News, K2 Inc.; Researched by JANICE L. JONES / Los Angeles Times
